Developers assure Canton Council $3M loan will be repaid

The developers who want to transform the former Hercules Engine industrial complex into 95 market-rate residential apartments offered a personal guarantee to City Council members that a proposed $3 million loan from the city will be repaid.

The developers who want to transform the former Hercules Engine industrial complex into 95 market-rate residential apartments offered a personal guarantee to City Council members that a proposed $3 million loan from the city will be repaid.

This assurance, which is expected to be put in writing, was met with resounding support from a majority of council members, who will vote on the loan next week. Another enticement offered by developers Monday was their verbal commitment to use local labor on the project.

Councilman Edmond Mack, D-8, said the decision in front of council is “a defining moment.”

“There is not one single person on this council that doesn’t believe we need downtown living,” Mack said. “This is the type of project that when our service on council is finished we can take our children down there and show them (it) and be proud of it. While there are some risks with this project, I think it’s a risk we take. I certainly am willing to take it.”

Council President Allen Schulman referred to the project as a “no-brainer.”

“This is the beginning, not the end,” he said. “This is the beginning of a project that, I think, we all envision will transform this community.”

GUARANTEE

Work on the $28 million project will begin in the next three months, said Robert Timken of Cormony Development. In order to meet the requirements of state and federal historic tax credits, the first phase must be completed by the end of 2014. Environmental cleanup is underway.

The key financier, Huntington Bank, is providing $13.8 million for the project. Another $5.5 million in equity, $3 million from the Clean Ohio Revitalization Fund, a $2.7 million contribution from the construction firm Skanska and the city’s $3 million round out the $28 million budget.

Of the city’s proposed loan, the developer must repay the city the first $1 million in the two years following construction. The remaining $2 million will be paid back over 20 years at 4 percent interest.

Timken and fellow Cormony officials Andrew Goldman and Samuel Polakoff, among other partners, personally guaranteed the project with their own money. Canton Development Director Fonda Williams said a written agreement is being prepared.

“We have agreed conceptually and we are working on language that will guarantee this,” Polakoff added.

One to three additional phases are planned and they include retail and commercial businesses, a boutique hotel and possibly a convention center. In 2006, a state grant funded a $735,000 feasibility study on the best uses for the 26-acre industrial property. In 2008, the entire project qualified for $36 million of state and federal tax credits. Developers’ plans stalled a year later due to the banking crisis.

Skanska officials are also guaranteeing they will finish their work, noting that it’s the key to triggering the state and federal tax credits.

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Dave Kirven of the East Central Ohio Building Trades said he believes there is a “sincere” commitment to the building trades by Cormony and Skanska officials.

HOUSING STUDIES

The city is going on its fifth straight month without either a single- or multi-family housing start, according to the Stark County Building Industry Association. Only 17 new homes were built in Canton in 2012, up by four from the previous year, which could be due to several factors including a lack of space and a still-stagnant housing market.

In 2012, a poll found that of the 800 respondents only 21.4 percent were either very interested or somewhat interested in downtown lofts or apartments. The bulk said they were “not at all interested,” citing crime, a dislike for downtown or the desire to become or remain a homeowner, among other factors. The Center for Marketing & Opinion Research conducted the poll for the Canton Development Partnership.

The Hercules property was among a dozen locations identified as “opportunity sites” by the Canton Downtown Special Improvement District’s downtown living committee. The committee was looking for suitable buildings that could be converted to market-rate apartments. It looked specifically for buildings that could accommodate four to 10 apartments. It is renovating an 8,500-square-foot building at 400 McKinley Ave. NW, where four market-rate apartments will go.

Josie Counts, a senior commercial portfolio manager with Huntington Bank, said the bank’s research showed that the apartments could be filled within six months. The analysis allows for six months of marketing time. She said she is confident the project will succeed.

“We always want to go in and do analysis so we know the project is going to sustain and we’re going to be repaid,” Counts said. “The analysis that was done indicated that it will do very well and it will lease up within six months. That’s a great thing for this area.”

Timken said Cormony’s studies have shown there is a market for the high-end apartments. He said the Canton area is a “sweet spot” for young professionals and empty nesters hoping to downsize and have better access to services. Demand for housing from the burgeoning oil and gas industry is also another major reason he anticipates the project being successful.

SUPPORT

In addition to Mack, nearly every member of council backs the loan for the project.

“We just have to have faith and stick with it,” said Councilman Greg Hawk, D-1.

Councilman Kevin Fisher, D-5, said council must be prudent with taxpayer funds, but Cormony officials’ willingness to place a personal guarantee on their money, “goes along way with the concerns I have.”

Councilman John Mariol, D-7, said there’s a risk spending $3 million, but he believes the return to the city will be more substantial. Timken took Mack, Mariol and West to Cleveland last week to visit similar sites.

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Councilwoman Mary Cirelli, D-at large, has questions. She wants more information about where the city’s share will come from. She also wonders if people will be willing to live next to train tracks near an intersection.

“I know I wouldn’t want to live there,” she said.

Service Director Warren Price described the project as potential game changer “for not only downtown, but for the city of Canton. It’s a type of development we’ve not seen before, but is a development that wherever we go, whether it’s Cleveland or Hamilton, Ohio ...there’s a real demand for it. Those spaces are filling up.”